Bayh-Dole, part of federal patent law, starts with a statement of “Policy and Objective” at 35 USC 200. Usually, commentators treat this bit as “preamble” or “a restatement of legislative intent” or, bluntly, inoperative fluff. The commentators are wrong. 35 USC 200 places conditions on patent property rights in the class of inventions arising from federally supported research or development. That class of inventions includes (1) all inventions within the scope of Executive Order 10096–inventions made by federal employees with federal support and claimed by the federal government; (2) all inventions not subject to the Bayh-Dole Act but made with federal support and in which the federal government has the right to acquire ownership by statute or by federal contract; and (3) all subject inventions–ones owned by a party to a federal funding agreement and made under contract. For this class of inventions, 35 USC 200 has a material effect.
35 USC 200 states not just objectives but also policy. Policy has a regulatory meaning. That policy replaces the Nixon executive branch patent policy, which in turn formed the basis for federal management of inventions obtained by specialty statutes, Executive Order 10096, or which were managed under procurement regulations.
35 USC 200 is general. It applies to
inventions arising from federally supported research or development
That’s broader than the definition of “subject invention” that’s specific to inventions made under federal contract. 35 USC 200 applies as well to inventions owned by the federal government and made by federal employees. If an invention “arises from federally supported research or development”–not in, not under, not pursuant to, but arising from–then the policy at 35 USC 200 applies. Any invention in any chain from discovery to the point of practical application–the end point of development–comes within the scope of 35 USC 200, if there’s federal support in whole or in part for the research or development. The federal support does not have to be directed at any given invention. The federal support does not have to expressly spent on any given invention. It is sufficient that the research work or development work receives federal support. The federal funding may support only a part of the overall work. Any invention arising within the scope of that overall work, even if only some part of that overall work has received federal funding, is also within scope of 35 USC 200.
Put simply, the federal scope of claim in such inventions is hugely huge. Imagine hugeness, and then push it to 11. That huge. Invention itself is anything that might end up being patentable down the road–new categories of medicines, new devices, from conception all the way through final product testing for each possible product latent in that first glimmer of conception. “Made in . . . work . . .funded . . . in part by the Federal government” expands the hugeness of invention to include any such invention in any project, any connected set of activities, for which any one of the activities of the project receives federal support. If federal funding laid the foundation for later inventive work, and that later inventive work is connected by common employment, common purpose bound by contract, or common understanding of a proposed objective, then that later inventive work “arises from” the federally supported work. Even if the inventive work is outside the scope of federally contracted work but diminishes or distracts from federally supported work, the invention is within scope of the federal claim of interest. Chronology does not matter. Separate accounting isn’t determinative.
Check it out. 35 USC 200 [arising from]. 35 USC 201(b) [definition of funding agreement–performance of work . . . in whole or in part; including any assignment, substitution of parties, or subcontract of any type]. 35 USC 201(d) [invention–is or may be patentable or otherwise protectable]. 35 USC 201(e)–subject invention–conceived or first actually reduced to practice in the performance of work under a funding agreement]. 37 CFR 401.1 [separate accounting not a determining factor; time relationship and use of new fundamental knowledge not important determinants; diminish or distract from performance creates federal interest]. See Mine Safety Appliances (1966). See in re Eddie L. King (1987). See Stanford v Roche (2011).
The federal government claim in inventions made in work with even partial federal support is hugely broad. Bayh-Dole, to preempt every last bit of the federal government’s claims, has to be every bit as hugely broad. That hugely broad scope is neatly reflected in “arising from.”
35 USC 200 is part of federal patent law. Here is the fundamental statement of federal patent law with regard to patents at 35 USC 261:
Subject to the provisions of this title, patents shall have the attributes of personal property.
35 USC 200 is a provision of this title. Patents on inventions arising from federally supported research or development are subject to the policy of 35 USC 200. 35 USC 200 therefore creates a special category of patents–those based on inventions arising from federally supported research or development.
Regardless of anything else in Bayh-Dole, 35 USC 200 lays out the boundaries of patent property rights and federal policy with regard to the disposition of inventions that come within its broad scope. When federal funding was only a small amount of the overall national research and development budget, perhaps it was easy not to worry. But now the federal contribution appears to be on the order of 1/3 of the national total. A substantial number of inventions and patents are within the scope of 35 USC 200–way more than are reported by contractors as subject inventions.
We can then look at the requirements of 35 USC 200.
It is the policy and objective of the Congress
There’s that “policy” in the opening, along with “objective.” This statement is equally one of policy, replacing executive branch policy.
to use the patent system to promote the utilization of inventions arising from federally supported research or development;
The patent system is to be used for a specific purpose–promote utilization–for any invention within scope of the policy. This is a new purpose within federal patent law. Federal patent law otherwise has no working requirement. An inventor, having obtained a patent, has no obligation under federal patent law otherwise to use the invention or allow anyone else to use the invention. But here 35 USC 200 policy requires the patent system to be used to promote utilization, not to suppress utilization and not to allow the owner of a patent to be indifferent to utilization.
35 USC 200 states a working requirement writ large–the patent system must be used to promote utilization. That is, the patent system must be used to create the conditions for utilization, encourage utilization, broaden the activity of utilization. As such, there is only a narrow basis in patent law for remedies for infringement of patents based on inventions within 35 USC 200’s scope. An owner of a patent on such an invention has no standing to sue for infringement unless in doing so the owner can demonstrate that this use of the patent system promotes utilization. How does excluding use promote use? How does demanding payment for use promote use? These are not idle questions–they are material to any reasonable interpretation of 35 USC 200. If an infringer misrepresents a product as safe when it is not, then the infringer’s utilization may properly be suppressed. But if an infringer is merely making, using, and selling an invention arising from federally supported research or development, then the patent system under 35 USC 200 has no purpose with regard to that infringer. Their infringement is within the policy of 35 USC 200. They are to be left alone.
Anyone getting sued for infringement of a patent arising in federally supported research or development should, among other defenses, offer the defense that the patent owner has no standing to sue under 35 USC 200 and is in fact, by suing anyway, breaching Bayh-Dole’s fundamental statutory policy and the patent therefore has been misused and should be invalidated.
to encourage maximum participation of small business firms in federally supported research and development efforts;
The policy encourages “maximum” involvement of small business firms. This encouragement is not merely that small businesses might receive grants and contracts from the federal government. Development includes post-inventive activity to transform inventions into products. Development is that set of activities from invention to “the point of practical application.” Here’s a formal definition of development in the FAR, 35.001:
“Development,” as used in this part, means the systematic use of scientific and technical knowledge in the design, development, testing, or evaluation of a potential new product or service (or of an improvement in an existing product or service) to meet specific performance requirements or objectives. It includes the functions of design engineering, prototyping, and engineering testing; it excludes subcontracted technical effort that is for the sole purpose of developing an additional source for an existing product.
Small companies are to be encouraged to “maximum” participation in the creation of new products based on inventions arising in federally supported research or development. And this encouragement is within the scope of federal patent law. Necessarily this encouragement then must have something to do with patents. A typical Bayh-Dole “advocate” might argue that this policy of encouragement is met if small companies have the right to retain ownership of inventions made in such research or development, and that this is all that some sponsors of Bayh-Dole intended this part to mean. But that’s not what 35 USC 200 says. The language includes “maximum” participation–and not just a restatement of using the patent system to promote utilization nor merely that small businesses should be encouraged to receive federal funding because they may be allowed to keep any inventions that they acquire and which were made with federal support. Maximum participation reasonably means participation in all aspects of research and development without any unnecessary or inappropriate barriers–including, clearly, barriers created by patents on inventions arising from federally supported research and development.
Just as the patent system is to be used to promote utilization of 35 USC 200 inventions, so also the patent system is to be used to encourage maximum participation by small businesses in research and development efforts. How can such a “maximum” participation of small businesses be achieved, if not by non-exclusive licensing of inventions and (perhaps) placing limitations on the licensing of inventions to non-small companies? If an exclusive license necessarily excludes many small businesses, that license cannot be compliant with 35 USC 200. The original Bayh-Dole Act restricted nonprofit exclusive licenses to non-small companies and required nonprofits to give a “preference in the licensing of subject inventions” to small businesses. The restriction on exclusive licenses was almost immediately amended away, and the licensing preference was weakened to the point of uselessness in the implementing regulations issued years later. None of that, however, changes the standing of 35 USC 200. The argument is: holders of patents on inventions arising in federally supported research and development do not have standing to refuse to license such inventions to small businesses unless they can demonstrate that doing so encourages “maximum” participation by small businesses in research and development efforts.
In any event, try without getting a headache to sort out the effect of Reagan’s executive order to extend Bayh-Dole to large companies on the maximum participation of small businesses. One would think that large companies, in obtaining ownership of inventions within 35 USC 200 scope, would have a statutory obligation under federal patent law to involve small companies in their subsequent research and development efforts. But we hear nothing of this–as if 35 USC 200 doesn’t exist. Without 35 USC 200, Bayh-Dole is a headless mess.
The upshot is that 35 USC 200 all but requires non-exclusive licensing on fair, reasonable, and non-discriminatory terms to small businesses for any research or development involving inventions arising in federally supported research or development. It’s just that Bayh-Dole does not come out and require such licensing. It is left to the patent holder to figure out any other means of complying with the law that does not involve non-exclusive licensing to small businesses on terms that small businesses can accept–for their maximum participation.
Sure–a patent holder of a 35 USC 200 invention can assign that invention or license it exclusively–but then whoever obtains control is faced with the same 35 USC 200 requirements. There’s no “Bayh-Dole” exhaustion provision that says “if you’re not too stupid to live, all you have to do is assign that invention to someone else and then Bayh-Dole no longer applies.” 35 USC 200 does not care who owns any invention within scope. It cares only about stating a policy on patent property rights specific to such inventions. The owner of the invention has only the property rights that patent law provides for the invention, and those property rights are shaped by 35 USC 200. An invention within the scope of 35 USC 200 is not an ordinary invention. A patent on such a non-ordinary invention is not an ordinary patent. The property rights available to the patent holder are not the ordinary property rights of federal patent law.
That’s the reality of Bayh-Dole.